Carnival Sunk by Profit Warning

LONDON -- The shares of Carnival have dropped 6% as of 9:20 a.m. EDT after the world's largest cruise company issued an overnight profit warning. Carnival, which was rocked last year by the Costa Concordia disaster, said its 2013 earnings would likely be between $1.45 and $1.65 per share. This was reduced from a previous EPS range of $1.80 to $2.10.

Carnival has suffered a string of high-profile calamities recently, including an engine fire on its Triumph cruise ship in February that left 4,000 passengers adrift for five days without adequate sanitation or electricity.

In light of these PR disasters, the cruise company has slashed ticket prices in an attempt to attract wary passengers. Carnival said that despite increasing cruise-booking volumes, this ticket-pricing policy had led to lower-than-expected revenues.

To make matters worse, the company said it expected higher operating costs and worse-than-expected voyage cancellations to wipe a further $0.10 from this year's per-share earnings.

With a market cap of £4.5 billion, Carnival's shares trade at 22 times expected earnings and offer a prospective dividend yield of 3.3%. Of course, whether that valuation, today's update, and the future prospects for the cruise industry all combine to make shares of Carnival a buy remains your decision.